August inflation data delivered a "stable yet progressive" report card amid a complex domestic and international environment. On September 15, the National Bureau of Statistics reported that the Consumer Price Index rose 0.8% year-on-year in August, up 0.3 percentage points from the previous month, while the Producer Price Index climbed 3.8% year-on-year, with momentum further accelerating as month-on-month declines reversed into gains.
Yang Yongyong, deputy director of the National Service Standardization Technical Committee and a senior researcher at the China Macroeconomic Research Institute, said in an exclusive interview that the core significance of these figures lies not in the size of the gains, but in the fact that pricing signals now transmitting in an orderly manner along the chain of "upstream improvement – midstream transmission – downstream recovery." He described this as a solid step in China's transition away from the feel of "quasi-deflation" and toward a state of "mild reflation."
Looking at consumer price trends since early 2026, Yang believes the pricing center is steadily lifting, the inflation "floor" has been firmly established, and the "recovery" channel is now open. He also noted that the quality of the current price rebound is relatively high. Looking ahead, he expects price levels to gradually converge with the government's "around 2%" annual target, supported by ample policy tools, emerging structural bright spots, and eased external input pressures.
Mild recovery
"The dual rebound in August CPI and PPI is the combined effect of structural warmth and policy dividends," Yang said. NBS data show that both headline and core CPI posted modest gains in August: month-on-month CPI turned positive to 0.4% from minus 0.1% previously, headline rose 0.8% year-on-year by 0.3 percentage points more than in July, and core CPI climbed to 1.0% year-on-year, up 0.1 percentage points from the prior month, extending the mild upward trend seen this year.
Yang attributed the modest CPI improvement to strong energy price gains. Domestic gasoline prices rose 7.2% month-on-month and 9.3% year-on-year, adding about 0.24 percentage points to the annual CPI rate compared with last month. He acknowledged a component of input-driven factors but stressed this reversed the earlier drag from energy, providing "timely rain" for the shifting pricing center.
More notably, new quality productive forces supplied structural support. Driven by surging computing demand, mobile phones, tablets, and data storage devices rose 2.3%, 2.1%, and 2.1% month-on-month, respectively, in August. Year-on-year, industrial consumer goods such as tablets, computers, and mobile phones were up 21.5%, 19.6%, and 11.0%, with the gains expanding. Yang sees this as evidence that demand growth in the digital economy and smart hardware is transforming from "growth in quantity" to "improvement in prices" — a positive transmission of industrial upgrade dividends to the pricing front.
These assessments align with industrial data. In the first eight months, China's integrated circuit exports rose 95.4% year-on-year, while investment in electronic circuit manufacturing grew 58.8% and integrated circuit manufacturing investment gained 12.0%, indicating that under policy guidance and market demand, investment is flowing increasingly toward emerging tracks.
Expanding service demand also supported the price recovery. Wang Guanhua, spokesperson for the National Bureau of Statistics and deputy director of the Department of Comprehensive National Economic Statistics, said at a State Council Information Office press conference that summer tourism and cultural consumption was active, with travel-related service prices up 1.3% year-on-year — a 1.2 percentage point acceleration from the prior month. Travel agency fees rose 2.4% and vehicle rental prices gained 2.2%.
PPI also drew attention. It turned up 0.4% month-on-month in August after falling 0.7% in July, and the year-on-year gain of 3.8% was 0.3 percentage points ahead of the previous month. Yang believes the expanding PPI increase showcases the combined effect of supply-side structural reform and industrial transformation. Over the longer span of this year, PPI has rebounded noticeably faster than CPI.
"In the first half of this year, PPI rose 1.5% year-on-year, with the second quarter up 3.6% — the first positive reading since the fourth quarter of 2022. This reflects both international commodity price pass-through and increased demand from domestic industrial upgrading," Yang said. He interpreted the recovery of industrial product prices as essentially a market-based "vote" for China's rising manufacturing competitiveness.
Robust domestic demand underpins prices
Against the backdrop of complex and volatile internal and external conditions, the economy faces some aggregate and structural pressures — making the price recovery a meaningful positive signal. Yang emphasized that strong domestic demand underpinning prices is one of the bright structural spots under pressure.
He acknowledged that fixed-asset investment fell 7.2% year-on-year in the January-August period, real estate development investment dropped 19.9%, and retail sales grew just 0.4% year-on-year in August while declining 0.13% on a monthly basis. While these genuinely reflect the bumpy path of domestic demand repair, he cautioned against concluding that "domestic demand cannot support prices," ignoring the structural positives beneath the data.
Within fixed-asset investment in the first eight months, intellectual property product investment rose 9.2% year-on-year, information transmission investment grew 28.4%, and air transport investment gained 16.7%. These accelerating investments in "new tracks" are forming a support base for high-end industrial goods and services prices. Consumption is also upgrading: online sales of food items rose 15.9% in the period, online service retail gained 5.1%, and rural retail sales growth of 2.3% continued to outpace urban growth at 1.0%. The consumption potential of lower-tier markets is being unleashed.
"More importantly, policy tools are storing energy for domestic demand," Yang said. The first 800 billion yuan of new policy-based financial instruments has been deployed, development of the "six networks" is accelerating, special bond issuance has quickened, and consumer loan interest subsidies have expanded in both scale and scope. These measures operate on both the "investment end" and the "consumption end," with effects expected to surface gradually in the fourth quarter.
Tao Chuan, chief economist at Guolian Minsheng Securities, recently told media that the structural divergence between strong exports and tech manufacturing on the one side and weak consumption and property on the other should gradually narrow in the second half, allowing for a smooth rotation between external and domestic demand engines. Yang sees price support precisely coming from the incremental demand activated during this "temperature difference convergence."
At the same press conference, Fu Linghui, spokesperson for the National Bureau of Statistics and chief economist, said economic growth is predominantly driven by domestic demand, with the consumer market expanding and services consumption performing well to underpin domestic demand. In the first half, domestic demand contributed over 80% of economic growth. Going forward, efforts will focus on expanding domestic demand, advancing industrial upgrading, and pushing the economy toward better, more innovative, and higher-quality development.
Inflation floor secured, recovery path open
Inflation data serve as a vital gauge of economic performance. This year's Government Work Report set the consumer price growth target at "around 2%" — a figure balancing the need to guide expectations and the realm of realistic possibilities, underscoring attention to the inflation issue.
Yang assessed consumer price trends this year by saying the path toward the "around 2%" target is winding, yet the direction is correct. The January-August average CPI gain of 0.9% year-on-year still trails the target, but he urged examining this in a longer time frame. From a trend perspective, the pricing center is steadily climbing: first-half CPI rose 1.0% year-on-year, with quarterly gains of 0.9% and 1.1%, marking three consecutive quarters of expansion. In August, core CPI returned to 1.0% year-on-year, while industrial consumer goods excluding energy rose 1.8%. Together these indicate the inflation "floor" is solidly in place and the "recovery" channel is open.
In terms of quality, the rebound carries relatively high "gold content." Yang said that unlike price increases driven merely by monetary easing, this round of price repair is coming more from services consumption pull and industrial upgrading transmission. In August, medical service prices rose 4.0% and travel services gained 1.3%, with the steady advance of services prices reflecting an upgrade in consumer structure. The GDP deflator also turned positive in the second quarter, ending 12 consecutive quarters of decline and signaling that "nominal recovery" is underway.
Yang added a caution regarding food prices, particularly pork, which dragged on CPI. Pork prices in August were down 11.8% year-on-year — a cyclical, temporary impact. As hog production capacity gradually clears and the peak consumption season approaches, the drag from food should ease. NBS data show consumer daily necessities were broadly stable to slightly lower in August: aside from pork, fresh vegetables, fresh fruit, grain, cooking oil, aquatic products, and dairy prices all eased slightly, down between 0.5% and 2.8%.
"Overall, the core message from August's price data is that the direction of price repair is clear, the pace is moderate, and the structure is improving. The dual rebound of CPI and PPI is not merely an improvement in numbers — it is a confirmation, through price signals, of the effectiveness of China's high-quality development as the economy shifts from expanding quantity to elevating quality," Yang said. Moving forward through the rest of the year, he expects price levels to gradually converge toward the "around 2%" target, supported by ample policy tools, visible structural bright spots, and eased external input pressures.